Incorporating Energy Efficiency (EE) in Air Quality Planning

Transcription

1 Incorporating Energy Efficiency (EE) in Air Quality Planning A Workshop for the Virginia Department of Environmental Quality Presented by Ken Colburn, Chris James, and John Shenot June 1, 2012 The Regulatory Assistance Project 50 State Street, Suite 3 Montpelier, VT Phone: web:

2 Introducing RAP, Chris, Ken, and John RAP is a non-advocacy, non-profit organization providing technical and educational assistance to government officials on energy and environmental issues. RAP Principals all have extensive utility regulatory experience. 2

3 Introducing RAP, Chris, Ken, and John Chris James is a senior associate at RAP; he previously led Connecticut s climate and energy efforts at the CT DEP. Ken Colburn is also a RAP senior associate; previously he consulted with states, directed NESCAUM, and led NH s air program. John Shenot joined RAP in 2011 after serving as policy advisor to Wisconsin s PSC and as an air quality engineer for Wisconsin s DNR. 3

4 Training Objectives 1. Enhance DEQ air quality planners understanding of: a. the value of EE as an air quality improvement strategy; b. how to incorporate existing EE policies and programs in air quality plans; and c. how to assess the potential for additional or proposed future EE policies and programs to contribute toward air quality improvement. 4

5 Training Objectives (cont.) 2. Enhance the ability of SCC and VEO staff to more fully evaluate the cost effectiveness of EE policies and programs through a better understanding of avoided environmental and other costs that are real and quantifiable. 5

6 The Big Picture Energy Efficiency should be a key element of any air quality improvement strategy Tools & methods exist for quantifying the impacts of EE on air emissions and including the impacts in air quality plans Coordination among agencies is needed 6

7 Rationale for Energy Efficiency (EE) as an Air Quality Strategy Workshop on Incorporating Energy Efficiency in Air Quality Plans for Virginia Department of Environmental Quality Presented by John Shenot, Chris James, and Ken Colburn June 1, 2012 The Regulatory Assistance Project 50 State Street, Suite 3 Montpelier, VT Phone: web:

8 Outline Is EE a big deal or small potatoes? What exactly is energy efficiency? How does EE affect air quality? Current/upcoming challenges for environmental regulators What advantages does EE have over other air quality strategies? 8

9 National Potential of EE Programs to Reduce GHG Emissions 11/26/2012 9

10 Energy Efficiency: Our Definition Energy efficiency refers to efforts to provide the same level of energy service or performance, such as heating or cooling a building, with less energy input. Example: an energy efficiency program may aim at replacing a standard electric motor with a high-efficiency motor; this gets the same work done using less electricity. Actions that sacrifice comfort or performance in order to reduce energy may be virtuous but are not energy efficiency as we will use that term today. 10

11 Energy Efficiency and Air Quality On-Site Impacts Example: gas furnace Off-Site Impacts Example: central A/C 11

12 U.S. Becoming Steadily More Efficient 12

13 Annual U.S. Electricity Growth Rate

14 Power Sector Impacts on Air Quality 14

15 Power Sector: A Major Share of US Air Emissions Sulfur Dioxide (SO 2 ), Million Tons 3.8 Million Tons 40% Other Sectors Electric Power 5.7 Million Tons 60% Coal 97% Nitrogen Oxides (NO x ), Million Tons 13.3 Million Tons 2.0 Million Tons 87% 13% Other Sectors Electric Power Coal 85% 3.9 Billion Tons 60% Carbon Dioxide (CO 2 ), Billion Tons Other Sectors Electric Power 2.6 Billion Tons 40% Coal 83% 14.3 Million Tons 96% Particulate Matter (PM 10 ), Million Tons Other Sectors Electric Power 0.5 Million Tons 4% Coal 95% 62 Tons 54% Mercury (Hg), Tons 52 Tons 46% Other Sectors Electric Power Coal >99% Coal-fired power plants: vast majority of power sector air emissions Sources: SO2 and NOx - NEI Trends Data and NEI 2005 Version 2 (2009) and CAMD Data & Maps (2010); PM10 - NEI Trends Data (2009); Hg - NEI 2005 Version 2 (2009); CO2 - Inventory of U.S. GHG Emissions and Sinks: (2010) and ; Other sources include transportation, other mobile sources, and industrial sources 7 15

16 Total Net Generation by Energy Source in 2010 Coal Natural Gas Oil Nuclear Hydro, Wind, Solar, Biomass, & Other VA 34.9% 23.3% 1.8% 36.4% 3.6% PJM 49.3% 11.7% 0.4% 34.6% 4.0% US 44.8% 23.9% 0.9% 19.6% 10.9% 16

17 CSAPR Transport Rule States 17

18 2008 Ozone NAAQS 18

19 What if the Ozone NAAQS is Tightened? 19

20 Consequences of Nonattainment 20

21 Other Electricity Sector Environmental Regulations Mercury and Air Toxics Standard NSPS for GHG Emissions PM2.5 NAAQS Revisions Coal Combustion Residuals (Ash) Rule SO2 NAAQS Revisions Effluent Limitation Guidelines 316(b) Cooling Water Rule 21

22 The Case for Efficiency 22

23 Energy Efficiency Provides Energy, Economic and Environmental Benefits Reduces criteria, toxic and GHG emissions Directly and indirectly reduces customer bills Provides inexpensive capacity to improve reliability of electricity system Reduces risk from fossil fuel price volatility and other unknowns Improves energy security Reduces stress on transmission and distribution Accumulates benefits over life of EE measure

24 The Cheapest Form of New Capacity 24

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26 Another View Toward Risk 26

27 Further Benefits of Industrial EE Measures can be highly cost-effective; some have negative payback period Improves economic competitiveness Energy savings improve profit margin Improved worker conditions May be eligible for lower insurance premiums due to reduced occupational exposure and risk 27

28 EE vs. Pollution Controls Both contribute to better air quality and improved public health, but EE is an investment that more than pays for itself over time, lowers overall system-wide costs of serving electric demand, improves reliability, and provides other co-benefits Pollution controls are an expense that increases system-wide costs of serving electric demand and provides little or no co-benefits 28

29 EPA s RIA for the MATS Rule Reflects Reduced Compliance Costs Through EE 29

30 Challenges with Using EE as an Air Quality Strategy Efficiency measures installed in an area with air quality problems don t necessarily reduce power plant emissions in that area Forecasting the energy savings and emission reductions that result from EE policies and programs is challenging (but we can suggest practical ways to do it) 30

31 Estimating Energy Savings from EE Policies and Programs Workshop on Incorporating Energy Efficiency in Air Quality Plans for Virginia Department of Environmental Quality Presented by John Shenot, Chris James, and Ken Colburn June 1, 2012 The Regulatory Assistance Project 50 State Street, Suite 3 Montpelier, VT Phone: web:

32 Outline Defining Energy Savings Importance of Energy Savings Data Looking Forward: Market Potential Studies Looking Backward: Evaluation, Measurement & Verification (EM&V) Gross versus Net Savings First Year, Lifetime, and Lifecycle Savings Importance of Timing and Location of Savings Real Examples from Virginia 32

33 Preview of Key Points The potential energy savings that will result from new efficiency policies can be predicted The actual energy savings that result from implemented policies can be verified Estimates are not as certain as CEM data, but methods are rigorous 33

34 Energy Savings Defined Energy Savings = Baseline Actual where Actual is the amount of energy used during a given period; and, Baseline is the amount of energy that would have been used during the same period had the efficiency measure(s) not happened 34

35 Energy Savings Visualized Source: National Action Plan for Energy Efficiency, Model Energy Efficiency Program Impact Evaluation Guide, November

36 Easy Example Exit signs operate all day every day LED exit sign uses 44 kwh/year Incandescent exit sign uses 350 kwh/yr Annual savings = 306 kwh/sign 36

37 Importance of Energy Savings Data Source: EPA State and Local Climate and Energy Program States use energy savings data to help inform and address the following important needs: PUCs need retrospective, timely information to ensure ratepayer value and cost-effectiveness Energy system planners need to know how EE policy is likely to affect the energy system (consistent with resource plans) Governors need talking points on the multiple benefits achieved with recent EE/RE investments DEPs need to know when and where EE/RE is likely to affect air emissions, and the magnitude of these impacts 37

38 Looking Forward: Potential Studies 38

39 What is a Market Potential Study? Prospective, quantitative assessment of market potential for deploying EE and/or RE (but usually just EE) Most often conducted by a third party under contract with a utility, state utility commission, or state energy office 39

40 Possible Purposes of a Potential Study Design or build support for new policies Identify alternatives to new generation, transmission and distribution assets Set realistic EE targets and/or budgets Select measures to include in EE programs Forecast energy savings Forecast emission reductions 40

41 Scope of Potential Studies Can cover a single neighborhood, a utility service territory, an entire state, or a region May be limited to electricity, or a fuel like natural gas, or all sources of energy Might cover all sectors of the economy, or just a subset (e.g. residential customers) 41

42 Multiple Meanings of Potential 42

43 Overview of Methodology for EE Potential Studies Identify technically feasible EE measures Determine costs of each measure Calculate benefits of each measure over time, relative to baseline assumptions Screen measures for cost effectiveness Adjust for barriers to adoption, expected market penetration, etc. 43

44 EE Potential in Virginia Staff s Report to the State Corporation Commission (SCC 2007) Energizing Virginia: Efficiency First (ACEEE 2008) American Council for an Energy-Efficient Economy (ACEEE), Summit Blue Consulting, ICF International, and Synapse Energy Economics 44

45 SCC Investigation (2007) Not a true market potential study Commission directed staff to: determine whether an electric energy savings goal in VA statutes can be achieved costeffectively identify the mix of programs that should be implemented to cost-effectively achieve the statutory goal 45

46 Virginia s Energy Savings Goal Enacted by the Legislature in 2007 Goal: By the year 2022, to reduce the consumption of electric energy through the implementation of cost-effective energy efficiency programs by an amount equal to 10% of the amount consumed in

47 Results: Staff Report to SCC (2007) There is a body of evidence indicating that the 10% goal is physically attainable The Staff believes that the 10% goal can be achieved even using a relatively conservative test for cost-effectiveness While the Staff believes that the 10% goal is attainable, there is substantial debate about the best way to achieve the goal 47

48 Summary of Results from ACEEE (2008) 48

49 Detailed Example for Residential Sector: ACEEE (2008) 49

50 Potential Reductions in Electricity Use: ACEEE (2008) 50

51 Looking Backward: EM&V 51

52 EM&V Definition and Background Source: EPA State and Local Climate and Energy Program Evaluation, measurement, and verification is the process of estimating energy, peak demand, and emissions impacts from energy efficiency (EE) policies, programs, or projects EM&V for EE programs is a mature field with well-developed methods Conducted for several decades in nearly all states/municipalities with significant public investment in EE EM&V refers to retrospective analysis It does not include forecasting the impacts of future policies, programs, or projects (although EM&V data are used to inform and improve forecasting) 52

53 EM&V is Serious Business In 2009, industry-wide spending on EM&V was estimated to exceed $200 million in the U.S. Ratepayer-funded programs spend between 0.5% and 5% of total program funding on EM&V, with mean of 2.8% 53

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55 Step 1: Estimate Gross Energy Savings Gross Savings = the amount that results directly from actions promoted by the EE program, regardless of the extent to which the program actually prompted the change Involves a combination of methods: Measured and verified savings Deemed savings Gross billing analysis 55

56 Measured &Verified Savings Used for large, complex, or risky projects or for programs in which a variety of factors determine savings Project savings determined by metering, modeling, or engineering calculations Program savings determined by selecting a representative sample of projects, measuring the savings from those selected projects, and extrapolating the results to the entire program 56

57 Deemed Savings Used for simple projects with wellunderstood savings that don t significantly vary from project to project Stakeholders stipulate that they will use deemed values to estimate energy savings for each project within a program Less accurate but also less expensive than M&V 57

58 Gross Billing Analysis Less common method Uses aggregated utility billing data and statistical methods, rather than project- or customer-specific measurements 58

59 Step 2: Estimate Net Energy Savings Net Savings = the portion of gross savings that can be attributed to the EE program, separating out other factors that influence behavior and consumption Why might net savings be different than gross savings? 59

60 Estimating Net Energy Savings: Why? Free riders: participants who would have acted even in the absence of the program Spillover: changes in energy use caused indirectly by the presence of the program Rebound: savings from installing an efficient device that are offset by greater use of the device 60

61 Estimating Net Energy Savings: How? Net-to-Gross Ratio (NTGR): 4 approaches 1. Self-reported survey responses from program participants 2. Self-reported survey responses enhanced with interviews or other documentation 3. Statistical/economic models that compare behavior of participants & non-participants 4. Deemed/stipulated NTGR based on past use of the other methods 61

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63 Temporal Aspects of Measurement Future net and gross savings caused by past actions can be forecasted Persistence is a key factor: will the efficiency of a project degrade over time? Need to understand if you are looking at: First year savings Lifetime savings Lifecycle savings 63

64 Energy Savings Visualized Source: Public Service Commission of Wisconsin, Focus on Energy Evaluation: Annual Report (2010), April

65 Technical Reference Manuals A common basis for evaluating savings By program Differentiated by climate zone as needed Defining baselines Slick on-line versions in Pacific Northwest and California

66 Importance of Timing and Location For some data uses, it doesn t matter when or where energy is saved But for air quality planning, it does matter because it (partially) determines which power plant won t be dispatched, and thus the emissions avoided Day, night, weekday or weekend, etc.? Concentrated in one geographic area, or evenly dispersed across the state? 66

67 Promising Examples Con Edison published a first-of-its-kind paper in 2011 describing their method for forecasting the expected future demand reduction at each substation that will result from their EE programs Con Edison and a few others also offer good examples of attempts to discern hourly variations in savings 67

68 Quantification Example: VA Statutory Goal 68

69 Step 1: Retail Electricity Sales History Retail Sales (GWh) Forecasted Sales (GWh) EE Savings Goal (GWh) Assumed EE Savings (GWh) Adjusted Sales (GWh) YEAR Source: EIA Data Source: AEO 2010 Source: State Statute Source: Interpolation Source: Column C - Column E , , , , , , , ,080 1, , ,193 2, , ,315 3, , ,449 4, , ,593 5, , ,748 6, , ,914 7, , ,092 8, , ,280 9, , ,480 10,672 10, ,808 69

70 Step 2: Retail Electricity Sales Forecast Retail Sales (GWh) Forecasted Sales (GWh) EE Savings Goal (GWh) Assumed EE Savings (GWh) Adjusted Sales (GWh) YEAR Source: EIA Data Source: AEO 2010 Source: State Statute Source: Interpolation Source: Column C - Column E , , , , , , , ,080 1, , ,193 2, , ,315 3, , ,449 4, , ,593 5, , ,748 6, , ,914 7, , ,092 8, , ,280 9, , ,480 10,672 10, ,808 70

71 Step 3: State Policy Goal Retail Sales (GWh) Forecasted Sales (GWh) EE Savings Goal (GWh) Assumed EE Savings (GWh) Adjusted Sales (GWh) YEAR Source: EIA Data Source: AEO 2010 Source: State Statute Source: Interpolation Source: Column C - Column E , , , , , , , ,080 1, , ,193 2, , ,315 3, , ,449 4, , ,593 5, , ,748 6, , ,914 7, , ,092 8, , ,280 9, , ,480 10,672 10, ,808 71

72 Step 4: Forecasted Energy Savings Retail Sales (GWh) Forecasted Sales (GWh) EE Savings Goal (GWh) Assumed EE Savings (GWh) Adjusted Sales (GWh) YEAR Source: EIA Data Source: AEO 2010 Source: State Statute Source: Interpolation Source: Column C - Column E , , , , , , , ,080 1, , ,193 2, , ,315 3, , ,449 4, , ,593 5, , ,748 6, , ,914 7, , ,092 8, , ,280 9, , ,480 10,672 10, ,808 72

73 Step 5: Adjusted Retail Sales Forecast Retail Sales (GWh) Forecasted Sales (GWh) EE Savings Goal (GWh) Assumed EE Savings (GWh) Adjusted Sales (GWh) YEAR Source: EIA Data Source: AEO 2010 Source: State Statute Source: Interpolation Source: Column C - Column E , , , , , , , ,080 1, , ,193 2, , ,315 3, , ,449 4, , ,593 5, , ,748 6, , ,914 7, , ,092 8, , ,280 9, , ,480 10,672 10, ,808 73

74 Monetizing Avoided Air Quality Costs Resulting from EE Workshop on Incorporating Energy Efficiency in Air Quality Plans for Virginia Department of Environmental Quality Presented by John Shenot, Chris James, and Ken Colburn June 1, 2012 The Regulatory Assistance Project 50 State Street, Suite 3 Montpelier, VT Phone: web:

75 Outline Overview of EE Cost Effectiveness Tests Examples Showing How the Choice of Which Test to Use Matters Types of Air Quality-Related Benefits Included in Each Test Recent Changes to Virginia Policy on Cost Effectiveness Tests 75

76 Who Cares About Cost Effectiveness? Source: State Energy Efficiency Action Network, 76

77 And Why Do They Care? Source: State Energy Efficiency Action Network, 77

78 Overview of Cost Effectiveness Tests 78

79 Costs and Benefits Used in Each Test 79

80 Energy & Capacity Avoided Costs 80

81 The Choice of Test Matters 81

82 Types of Air Quality-Related Benefits Avoided costs within the utility system (included in PACT, RIM, TRC and SCT): Emission fees Pollution control costs Avoided costs external to the utility system (included in SCT, but harder to quantify): Non-utility costs of non-attainment Public health costs 82

83 Consequences of Nonattainment 83

84 Getting it Right Air regulators have information on air quality-related costs and benefits that utilities and other interveners might not provide to the SCC These costs/benefits can be substantial Air regulators and utility commissions should collaborate to ensure that costeffectiveness tests are accurate and comprehensive 84

85 Recent Changes to Virginia Policy Until this year, SCC policy afforded the greatest weight to the RIM test In April 2012 the Assembly enacted (nearly unanimously) a new law providing that a program or portfolio of programs shall not be rejected solely based on the results of a single test 85

86 Other Opportunities to Consider EE in AQ Plans and SCC Proceedings Workshop on Incorporating Energy Efficiency in Air Quality Plans for Virginia Department of Environmental Quality Presented by John Shenot, Chris James, and Ken Colburn June 1, 2012 The Regulatory Assistance Project 50 State Street, Suite 3 Montpelier, VT Phone: web:

87 Outline Utility EE Plans EE in IRP Processes Efficiency Power Plants Efficiency-Based Load Balancing 87

88 Utilities File EE Plans with SCC Many states require all utilities to fund energy efficiency programs with funds collected from ratepayers Virginia does not have mandatory EE, but utilities may request SCC approval to spend ratepayer money on EE programs that are cost effective and help achieve the commonwealth s EE savings goal 88

89 What is an Integrated Resource Plan? An IRP is a long-term, consolidated plan for meeting a utility s needs (or a state s needs), taking into consideration costs, quality and capability, risks, and reliability An IRP uses consistent economic assumptions and evaluates both supply and demand-side options It may not be the least cost plan 89

90 Resources Considered in an IRP Existing generation, transmission and distribution assets Existing power purchase agreements New generation/transmission/distribution New power purchase agreements Energy efficiency Demand response 90

91 U.S. STATES WITH INTEGRATED RESOURCE PLANNING OR SIMILAR PLANNING PROCESS Effective December 2009 ME WA VT CA OR NV ID UT MT WY CO ND SD NE KS MN IA MO WI IL IN MI TN KY OH WV NY PA VA NC MA CT NJ DE MD DC NH MA RI AZ NM OK AR SC AK TX LA MS AL GA FL HI No IRP or planning process SOURCE: Regulatory Assistance Project 2009 Policy Grid Update States with IRP or other planning process

92 Efficiency Power Plants (EPP) An EPP is a bundled set of energy efficiency programs designed to deliver the energy and capacity equivalent of a large conventional power plant Produces negawatts and negawatt-hours that are functionally equivalent to the kilowatts and kilowatt-hours produced by a conventional power plant 92

93 EPP is Tailored to Meet Utility Needs Can resemble a conventional peaking plant by emphasizing efficiency measures that reduce electricity during periods of peak power consumption; OR Can resemble a base-load power plant by emphasizing measures to reduce consumption during all hours of the day 93

94 Efficiency Smart Power Plant = EPP? American Municipal Power Inc. (AMP) agreed in a consent decree with EPA to build an EPP serving members in 6 states AMP members in KY, MI, OH, PA, VA, WV Vermont Energy Investment Corporation under contract to build the EPP Project launched in 2011 and exceeded first year energy savings goals 94

95 Efficiency-Based Load Balancing Energy efficiency and demand response measures offer an alternative to flexible generation resources that quickly ramp up or ramp down to match load Increasingly possible with smart grid technologies that can remotely turn these measures on and off as needed 95

96 Conclusions Some routine SCC dockets esp. utility EE plans and IRPs present opportunities to promote greater consideration of the AQ benefits of energy efficiency Efficiency power plants and demand-side load balancing are newer concepts that are gaining traction and should be among the resource planning options considered 96

97 About RAP The Regulatory Assistance Project (RAP) is a global, non-profit team of experts that focuses on the long-term economic and environmental sustainability of the power and natural gas sectors. RAP has deep expertise in regulatory and market policies that: Promote economic efficiency Protect the environment Ensure system reliability Allocate system benefits fairly among all consumers Learn more about RAP at Ken Colburn kcolburn@raponline.org Chris James cjames@raponline.org John Shenot jshenot@raponline.org